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September 17, 2020

A Summer of Low Mortgage Rates

Author: Courtney Stutts Huge, CFP®

For many of us, the summer of 2020 has been the summer of quarantine and finding new ways to do our favorite things. But it’s also been the summer of historically low mortgage rates. In early August, the average for a 30-year fixed loan fell to 2.88%, the lowest in nearly 50 years. Meanwhile, the average interest rate on a 15-year mortgage hit a low of 2.44% and has since hovered around the 2.5% mark. Rates as low as these can make purchasing or refinancing a home more affordable by reducing monthly payments and saving on interest costs.

Last month was not the first time mortgage rates have hit a new low this year. In fact, since the coronavirus started disrupting financial markets in March it was the eighth time that rates have dropped to a new record low. While the future is never certain and it’s impossible to predict where rates go from here, there is reason to believe they will most likely remain low for a number of years.

That’s in part due to the Federal Reserve’s recent stance to hold its benchmark rate near zero and to buy mortgage bonds to help stimulate the economy. As a reminder, the Fed has no direct role in setting mortgage rates but it can indirectly influence them at any given time. That’s what has been happening this summer and it can have a direct impact on your finances. 

Low mortgage rates also apply to refinances so those of you who are looking to exchange an existing home loan for a new one may benefit. Today’s historically low rates can present opportunities for some clients but not everyone is in a position to refinance. Some considerations to keep in mind before going through the refinance process include:
 

  1. How long do you plan to stay in your home? You’ll want to make sure you plan to stay in your home for long enough so that the savings associated with refinancing cover the closing costs you’ll incur during the process. 
  2. Are you in a good financial position to get a competitive rate? Before moving forward with refinancing, take a look at your credit to make sure it’s in good standing. This will help you shop around for the best rate and get a solid loan estimate from each lender you reach out to.
  3. Is now a good time to take on a time-intensive endeavor? As appealing as rates are right now, it’s important to remember that the refinance process can take a lot of time and energy. Given the Fed’s statement to keep the status quo for the foreseeable future, waiting until you are more prepared might be a good idea. The Fed’s commitment to the economy should give you an extended chance to secure a low rate without having to rush through the process. And as we have all seen and felt during the pandemic, your health and safety is paramount to any financial undertakings.

If you would like to discuss whether refinancing your mortgage makes sense for you please feel free to give us a call. We are happy to talk about your overall financial picture as it relates to your current mortgage rate.

Required Disclosures:

Registered Representative of Cetera Advisor Networks LLC, member FINRA/SIPC.  Carroll Financial Associates, Inc., a Registered Investment Adviser. Carroll Financial and Cetera Advisor Networks are not affiliated.

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